ROYAL Bank of Scotland’s new chief executive Ross McEwan yesterday set out his strategy for restoring its battered reputation as heavy losses delayed its likely return to the private sector.

Shares in the bank, 81 per cent owned by taxpayers, tumbled 27½p to 326½p as it racked up worse than expected annual losses of £8.2billion.

New Zealander McEwan, who took over from Stephen Hester last October, unveiled plans to slim down the bank and focus on UK retail, small business and corporate banking and rebuild the trust of its customers.

“We are the least trusted company in the least trusted sector of the economy. That must change,” he said.

The annual losses were up from £5.3billion in the previous year and followed £3.8billion of charges for fines and compensation related to a series of scandals including £900million for PPI insurance mis-selling and £4.8billion for the creation of an internal “bad bank”.

RBS will be smaller as it cuts £5.3billion of costs over the next few years including the flotation this year of its Citizens bank in the US and the demerger of 314 UK branches under the Williams & Glyn banner to meet EU rules. It will also slash the number of computer systems it runs and scale back its property portfolio.

We are the least trusted company in the least trusted sector of the economy

Ross McEwan, RBS chief executive

Although he declined to put a number on how many branches might close McEwan said the bank had to meet demand from customers who were increasingly using mobile banking “in the mornings on the way to work on the bus or train”.

He added the bank needed to win back trust by doing away with gimmicks such as “teaser rates” for new customers.

He said: “It is absolutely abhorrent that you offer a better rate to a new customer than you do to someone who has been with you for 30 years. Customers hate that.”

Chairman Sir Philip Hampton conceded that turning the bank around had taken longer than expected partly because of unforeseen problems such as the state of the Irish property market and provision for litigation.

He said 80 per cent of the changes necessary for a sale of government shares in the bank had been made but a sell-off was “another year or so away”.